State insurance regulators hesitate to embrace Obamacare fix

U.S. President Barack Obama takes the stage to deliver remarks on the Affordable Care Act, commonly known as Obamacare, at an Organizing for Action grassroots supporter event in Washington, November 4, 2013.

Reuters/Jonathan Ernst

Many U.S. states are hesitant to embrace President Barack Obama's fix to keep Americans from losing health insurance plans that do not comply with his healthcare reform, saying they need to figure out how to resurrect canceled policies and whether to allow insurers to raise prices.

California, Colorado, Florida, South Carolina, Ohio and Oregon said they would act on Obama's offer, announced on Thursday, to give a one-year extension to existing policies. Washington, Vermont and Rhode Island - all of which are running their own state-based insurance exchanges - said they would not.

But at least 16 insurance departments queried by Reuters from states as diverse as Alabama, Virginia, Minnesota, Maryland and Michigan said they did not have enough information and were still trying to decide how to proceed.

The responses highlight the complexity of efforts to modify unpopular, or unworkable elements of Obama's Patient Protection and Affordable Care Act. Several million Americans stand to have their individual health insurance canceled at some point in 2014 despite a pledge by Obama that people who liked their benefits would be able to keep them under his law.

That pledge became a focus of Republican efforts to change or delay Obamacare, culminating in a vote in the House of Representatives on Friday on a Republican bill to keep the existing policies. It was supported by 39 members of Obama's Democratic party.

But Obama's decision to allow an extension requires each state to examine whether it can do so under existing laws.

Some regulators are waiting for answers from the federal government on the guidelines for allowing insurers to increase the prices on these plans in 2014.

At stake, they say, is the financial viability of the health plans and the insurers. Unexpected changes in the mix of healthy and sick, young and old people who choose the existing plans over new Obamacare-compliant policies could mean that some insurers lose money and policyholders end up empty-handed.

"There are so many moving parts to this process. When you tamper with one, no matter how good your intention is, you have intended consequences and unintended consequences," Ben Nelson, chief executive of the National Association of Insurance Commissioners, said in an interview.

NO INPUT

Nelson and regulators who are undecided said they were not asked for input on Obama's proposal and first heard of it on Thursday.

"From a regulator's perspective, it was a little disappointing to come up with this idea and not check with the regulators to see if functionally it was going to work," said Wisconsin Deputy Insurance Commissioner Dan Schwartzer.

Insurers also were unaware of the plan until it was announced, according to two industry sources. On Friday, they met with the President at the White House to "brainstorm" how to make the fix work.

Schwartzer said he was looking to hear back from administration officials as soon as possible with more information that would help Wisconsin decide how to proceed, though he said that like some other states the department had already encouraged insurers to issue early renewals on expiring policies through most of 2014.

In addition to Obama's Thursday speech outlining the fix, commissioners have a 2-1/2 page letter from the Centers for Medicaid and Medicare Services that contains guidelines for carrying it out. Regulators have had several conference calls in the last two days, including at least one that included officials from CMS, several state insurance department sources said.

The pressure is on insurers to implement this change by the end of December before plans start to be canceled on January 1.

"The president is essentially asking them to do in the next six weeks what normally takes a year to do, which is offer a policy and certify it for sale ... I think they can do something but I don't think they are going to get a radical impact on the number of people with dropped policies," said Douglas Holtz-Eakin, President of the American Action Forum and a health economist.

Among states that have decided how to proceed, some that plan to allow the fix do so out of opposition to Obamacare.

"Of course we will let South Carolinians keep their insurance plans. They never should have lost them in the first place, and should be able to keep them far beyond this one-year 'fix' that President Obama is proposing. Obamacare is a complete disaster, and we don't want any part of it," said Doug Mayer, spokesman for Republican Governor Nikki Haley.

The few that have rejected the fix were states that early on embraced the new health marketplaces under Obamacare and say it will create an imbalance in their fledgling market. Vermont had already worked with local insurers to allow state residents and small business to extend their current policies until March 31, and won't go further than that.

"We remain confident in that timeframe and believe it will provide Vermonters the security and options they need," Governor Peter Shumlin said in a statement.